SAFE HAVEN? TARGETING THE PROCEEDS OF FOREIGN CORRUPTION IN IRELAND - Transparency International Ireland
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SAFE HAVEN? TARGETING THE PROCEEDS OF FOREIGN CORRUPTION IN IRELAND
Transparency International Ireland is an independent, non-profit and non-partisan organisation. Our vision is of an Ireland that is open and fair, and where entrusted power is used in the public interest. Our mission is to empower people with the support they need to promote integrity in public life and stop corruption in all its forms. www.transparency.ie Editor and Researcher: John Devitt Authors: Alexander Chance and Dr Colin King Assistant Researcher: Dr Slobodan Tomic Design: sophieeverett.com.au Cover: shutterstock.com/Paul Daly (CC) Transparency International (Ireland) Company Limited by Guarantee 2020. This work is licensed under a Creative Commons AttributionNonCommercial- NoDerivatives 4.0 International License. The information contained within this publication does not constitute legal advice and should not be relied upon as such. In addition, although every reasonable effort is made to present current and accurate information, Transparency International Ireland makes no guarantees of any kind. Any use of or reliance on the information contained in this report is solely at the user’s risk. Some identifying information may have been changed. This study was published with the financial support of the Open Society Foundations Eurasia Program, however it reflects the views of Transparency International Ireland alone. Neither Transparency International Ireland nor OSIFE can be held responsible for any use which may be made of the information contained herein.
SAFE HAVEN? TARGETING THE PROCEEDS OF FOREIGN CORRUPTION IN IRELAND
CONTENTS
04 1. INTRODUCTION 30 5. REPATRIATION
Is Ireland a ‘safe haven’ for the We’ve confiscated the money,
proceeds of international corruption? now what?
30 5.1 Overview
07 2. THE RISK 30 5.2 The legal framework for repatriation
Assessing Ireland’s vulnerability to 31 5.3 Barriers to repatriation
the threat of international corruption – and possible solutions
07 2.1 The scale of international corruption
09 2.2 Ireland’s self-assessment 33 6. RECOMMENDATIONS
13 2.3 Financial institutions
15 2.4 Non-financial sectors 35 7. CONCLUSION
Making Ireland a hostile
environment for the proceeds
17 3. THE RESPONSE of international corruption
Assessing Ireland’s legal and
institutional framework
17 3.1 International instruments
37 BIBLIOGRAPHY
18 3.2 Domestic legislation
44 END NOTES
20 3.3 Policy and enforcement institutions
21 3.4 Supervisory bodies
23 3.5 Strategy, coordination
and communication
25 4. THE REALITY
Practitioner perspectives on Ireland’s
AML and anti-corruption framework
25 4.1 Overview
25 4.2 Regulatory enforcement
26 4.3 Criminal enforcement
28 4.4 International cooperation
02 Transparency International Ireland
LIST OF ACRONYMS AND ABBREVIATIONS
AML Anti-Money Laundering IIP Immigrant Investor Programme
AMLCU Anti-Money Laundering MER Mutual Evaluation Report
and Compliance Unit
MLA Mutual Legal Assistance
CAB Criminal Assets Bureau
NCB Non-Conviction Based orders
CARIN Camden Asset Recovery
NRA National Risk Assessment
Inter-agency Network
ODCE Office of the Director
CDD Customer Due Diligence
of Corporate Enforcement
CFT Combatting the Financing
OECD Organisation of Economic
of Terrorism
Cooperation and Development
CJA Criminal Justice Act(s)
PEPs Politically Exposed Persons
CoE Council of Europe
POCA Proceeds of Crime Act(s)
CRO Companies Registration Office
PSPs Property Services Providers
DFAT Department of Foreign
PSRA Property Services
Affairs and Trade
Regulatory Authority
DJE Department of Justice
RBO Register of Beneficial Ownership
and Equality
SDGs Sustainable Development Goals
DNFBPs Designated non-financial
businesses and professions TCSPs Financial Trust/Company
Service Providers
DoF Department of Finance
SPEs Special Purpose Entities
DPP Office of the Director
of Public Prosecutions SPV Special Purpose Vehicles
ECDD Enhanced Customer StAR UN Stolen Assets
Due Diligence Recovery initiative
FATF Financial Action Task Force STRs Suspicious Transactions Report
FIU Financial Intelligence Unit TI Transparency International
Garda An Garda Síochána UNCAC United Nations Convention
(Ireland’s Police Service) Against Corruption
GFAR Global Forum on UNODC United Nations Office
Asset Recovery on Drugs and Crime
GNECB Garda National Economic 4AMLD Fourth Anti-Money
Crime Bureau Laundering Directive
GRECO Group of States 5AMLD Fifth Anti-Money
Against Corruption Laundering Directive
HVGs Luxury and high value goods 6AMLD Sixth Anti-Money
Laundering Directive
HVGDs High Value Goods Dealers
IFSC Irish Financial Services Centre
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 03
1.
INTRODUCTION
Is Ireland a ‘safe haven’ for the
proceeds of international corruption?
While much discussion on recovering the proceeds of corruption tends to focus on countries like the
United States and Switzerland, or offshore jurisdictions such as Jersey and the Isle of Man, it is clear
that Ireland is also not free of such ‘dirty money’. Although relatively few cases involving the alleged
proceeds of foreign corruption in Ireland have reached the courts, those that have illustrate the risk
that the country’s financial services and wider economy could be used as a conduit for laundering
illicit financial flows from overseas.
In 2014, for example, the Criminal Assets Bureau (CAB) In August 2020, the Irish Government announced
obtained an order under the Proceeds of Crime Act that it had reached an agreement with the Nigerian
1996 & 2005 (POCA) to freeze assets in Ireland linked Government to return approximately €5.5 million.6
to alleged corruption on the part of the former governor The repatriation of these funds is governed by a
of the Tourism Authority of Thailand, Juthamas Siriwan. Memorandum of Understanding (MOU) between the
Ms Siriwan was accused of receiving kickbacks to two governments, Although the MOU refers to the
award the Bangkok International Film Festival to a US need for transparency and accountability in the return
company. The frozen funds, worth €250,000, were held and disposal of the funds, it has been criticised for
in investments by HSBC Life (Europe) Ltd in the name containing few specific provisions on safeguards
of the former governor and her daughter.1 Siriwan was against corruption and the absence of any reference to
eventually convicted in Thailand of receiving US$1.8 the role of Nigerian civil society in monitoring the use of
million in bribes and sentenced to 50 years in jail, while the returned assets.7
her daughter was sentenced to 44 years’ imprisonment
for money laundering.2 Perhaps the largest known foreign corruption-related
money laundering case in Ireland’s history arose during
Also in 2014, CAB obtained another order under the summer of 2015, when US authorities brought
POCA to freeze US$6.5million worth of investments, proceedings to freeze corruptly obtained assets from
again managed by HSBC Life (Europe) Ltd, held for Uzbekistan.8 Reports suggest that between US$100
the benefit of Mohammed Sani Abacha – the son of million and US$300 million of corrupt payments were
former Nigerian president and dictator Sani Abacha.3 laundered through funds managed by Bank of New York
The funds were held in 30 life assurance policies run Mellon in Dublin.9 The funds were managed on behalf of
by HSBC Life (Europe) in Ireland, which the High Court companies owned by Gulnara Karimova, the daughter
subsequently ruled as representing the proceeds of of former Uzbek president Islam Karimov. Though details
crime.4 In 2013, HSBC Life (Europe) had announced remain scarce, it appears that Karimova was convicted in
that it was moving its insurance portfolio from Ireland to Uzbekistan in 2015 of fraud and money laundering arising
Malta, although there is no suggestion that this move from investigations into allegations that she benefitted
was a result of money laundering investigations.5 from almost US$1 billion paid in bribes by Russian and
Dutch telecommunications companies to influence the
award of Uzbek mobile telephone licences.10
04 Transparency International Ireland
Photo: shutterstock.com/Jaguar PS
The Karimova case is noteworthy for more than the
vast sums of money involved. The case may pose
a series of significant legal and political difficulties
for the Irish Government, not least because of the
appalling human rights and corruption record of the Perhaps the largest known
Uzbek Government.11 The arrest, investigation and
subsequent treatment of Karimova herself has also
foreign corruption-related money
been questioned by international observers.12 A group laundering case in Ireland’s
of Uzbek political exiles has since written to the Irish
Government to argue that, if returned, the funds are history arose during the summer
likely to be abused by the Uzbek Government and
to suggest that the money be returned to the victims
of 2015, when US authorities
of corruption in Uzbekistan by way of charities and
trusts.13 Moreover, it is also believed that the proceeds
brought proceedings to freeze
in question are being pursued by the US Government, corruptly obtained assets from
which claims jurisdiction in the case. How the Irish
Government and courts approach and handle these Uzbekistan. Reports suggest
issues may therefore set important legal and political
precedents for future asset recovery cases in Ireland.
that between US$100 million
It is impossible to determine the true extent of the
and US$300 million of corrupt
laundering of corruptly obtained assets through Ireland. payments were laundered
However, this small sample of cases highlights the risks
associated with providing international financial services through funds managed by Bank
– particularly when those financial services form a
central element of the country’s open economy.14
of New York Mellon in Dublin.
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 05
In a global context in which the willingness and ability assets via Ireland, first by providing a brief overview
of governments to combat elite-level corruption is of the scale of international corruption, and then
under increasing scrutiny, such cases pose a number by exploring key money laundering risks that may
of questions around the capacity and capability of be relevant to overseas corruption cases. Chapter
Ireland’s laws, policies and institutions to stem the flow 3 examines Ireland’s response to those risks, in
of dirty money into the country – and, indeed, to ensure terms of its legislative, institutional, strategic and
that the proceeds of economic crime can be recovered regulatory framework. Chapter 4 describes the reality
and redirected to the victims, rather than the culprits, of Ireland’s anti-money laundering (AML) framework,
of grand corruption. As an enthusiastic supporter of drawing upon interviews and correspondence with
the United Nations’ Sustainable Development Goals AML practitioners in both the public and private
(SDGs), Ireland has the opportunity to show whether sectors to examine its strengths, weaknesses and
it will help deliver on SDG 16’s objective to provide vulnerabilities from their perspectives. Chapter 5 asks
access to justice to all and build strong, accountable whether Ireland has appropriate legal, practical and
institutions. It can go some way towards this by political mechanisms in place for the repatriation of
supporting the recovery and responsible return of corruptly obtained assets to their countries of origin.
stolen assets.15 Drawing on these perspectives, Chapter 6 presents a
set of recommendations that would help to prevent
This report therefore examines the extent to which Ireland from becoming – or perhaps remaining – a
Ireland is prepared to detect, freeze, recover, and safe haven for the world’s dirty money. By way of
repatriate the proceeds of overseas corruption conclusion, Chapter 7 offers some final thoughts on
laundered through the Irish economy, in particular the policy decisions that will be required for Ireland to
by Politically Exposed Persons (PEPs) such as become a truly hostile environment for the proceeds
Gulnara Karimova and her associates. Chapter 2 of international corruption.
assesses the risk of laundering corruptly obtained
Photo: istockphoto.com/massimofusaro
06 Transparency International Ireland
2.
THE RISK
Assessing Ireland’s vulnerability
to the threat of international corruption
2.1 THE SCALE OF should be invested in healthcare, sanitation, education
and public utilities are used to fund lavish lifestyles
INTERNATIONAL CORRUPTION and to empower corrupt rulers, public officials and
Corruption is, by its very nature, hard to quantify. organised criminals.22 The ruling family of Equatorial
Nevertheless, a number of international studies Guinea’s president Theodoro Obiang, for example,
have attempted to gauge the approximate scale of has looted a country with the highest GDP per
corruption at a global or regional level. The United capita in Africa, leaving it with an infant mortality rate
Nations estimates that US$2.6 trillion are stolen that is higher than that of war-riven South Sudan.23
through corruption each year – ‘a sum equivalent Indeed, corruption can be said to pose a threat to the
to more than five per cent of the global GDP’ – with achievement of any and all of the UN’s SDGs.24
funds lost to corruption undermining the rule of law
Ruling elites that rely on grand corruption also protect
and aiding crimes such as the illicit trafficking of
their illicit gains through the abuse of human rights, the
people, drugs and arms’.16 According to the World
use of state intimidation and violence against political
Bank, ‘businesses and individuals pay an estimated
reformers, journalists and members of civil society
$1.5 trillion in bribes each year’, which amounts
organisations. Uzbekistan’s former president, Islam
to approximately ‘10 times the value of overseas
Karimov (father of Gulnara Karimova) was reported
development assistance’.17 The High Level Panel
to have overseen a brutal regime that relied on the
on Illicit Financial Flows from Africa has previously
torture and murder of political opponents to protect its
suggested that the continent was losing in excess of
status and financial interests.25 Karimov’s successor
US$50 billion each year through corruption – though
and current president Shavkat Mirziyoyev has pledged
also suggested that ‘these estimates may well fall
a crackdown on corruption and pledged democratic
short of reality’.18 The NGO Global Financial Integrity
reforms, including an overhaul of the country’s security
estimated that the total illicit financial outflows from
and criminal justice sectors.26 It should be noted,
all developing countries for one year alone was
however, that in his previous capacity as a regional
between US$620 and US$970 billion.19 And the think
governor and prime minister, Mirziyoyev is alleged
tank International IDEA calculate that 43 per cent of
to have been responsible for overseeing a system of
countries still have such high levels of corruption that it
forced labour in Uzbekistan’s cotton industry.27
obstructs human development.20
Gulnara Karimova was protected by the same system
The indirect social costs of corruption might be more
that enriched her father. The fashion designer, pop
difficult to quantify but they are no less significant.
singer and businesswoman was also the owner of
Grand corruption leads to political instability and
Uzbekistan’s largest conglomerate and is believed to
conflict, undermining citizens’ confidence in democratic
have worked closely with officials and organised
institutions and the rule of law.21 Public resources that
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 07criminals in Uzbekistan to enrich herself, whilst using Beforehand, though, it should be noted that money
her status to have her opponents jailed and her laundering risks also exist outside these categories,
competitors’ businesses closed down.28 In 2015, through the exploitation of state policies. One example
the US Department of Justice charged three might be the state’s ability to grant exemptions from
telecommunications companies with paying bribes AML obligations. Though the very occasional need for
valued at US$1 billion to Karimova in order to secure such exemptions is recognised in international best
Uzbekistan’s mobile phone licence. The proceeds of practice, they should be used in ‘strictly limited and
this corruption were then laundered through financial justified circumstances’, based upon demonstrable low
centres in Ireland, the Netherlands, Switzerland and risk.30 In Ireland’s case, however, the Financial Action
the UK.29 Thus, while the full scale of the problem is Task Force (FATF) recently found that state-granted
difficult to quantify, the use of international financial exemptions are ‘not based on clearly proven low risk’.31
centres – such as Ireland – in laundering of proceeds Perhaps the most notable example of state-facilitated
of corruption is undeniable. risk is the offer of residency visas, or so-called ‘golden
While the full scale of the problem is difficult to quantify,
the use of international financial centres – such as Ireland
– in laundering of proceeds of corruption is undeniable.
As such, the fight against corruption relies to a visas’, in return for substantial investment in a country’s
significant extent upon the ability of individual states economy by High Net Worth Individuals. This practice
to protect their financial systems and economies has been denounced as both unethical32 – exempting the
from money laundering. In order to effectively protect wealthy from the typically strict immigration requirements
themselves from this threat, states require an accurate imposed on other applicants – as well as a security risk.33
understanding of the risks and vulnerabilities to money It has also been recognised by the European Parliament
laundering posed by different sectors within their as a money laundering risk – in particular from corrupt
economies. This report does not seek to replicate in- businesspeople and PEPs who are seeking a safe
depth studies of each sector of the Irish economy (such haven for their illicitly obtained assets.34 Ireland is one of
as in the Government’s National Risk Assessment the EU countries that continues to offer an ‘Immigrant
(NRA) – see section 2.2) but rather to identify and Investor Programme (IIP)’ – for which it has received
briefly discuss themes that are especially pertinent ongoing criticism.35 In response to such concerns, the
to the laundering of assets obtained by corruption Irish Government has introduced enhanced levels of due
overseas. We first consider how the Irish Government diligence for all IIP applications,36 though programmes
has assessed and calibrated money laundering risks, such as these continue to illustrate how money
before examining specific corruption risk areas within laundering risks can emanate from the state as well as
the financial and non-financial sectors respectively. from the private sector.
08 Transparency International IrelandPhoto: shutterstock.com/Derick Hudson
The NRA contains a dedicated chapter on the Irish
2.2 IRELAND’S SELF-ASSESSMENT financial services sector, and the risks inherent therein.
How, then, has Ireland sought to understand its It recognised that this sector ‘as a whole is at risk of
risk of money laundering? In 2016, the Government being targeted by criminals to launder the proceeds
of Ireland released its first ever ‘National Risk of crime and finance terrorism’.43 Specific risk factors
Assessment for Ireland: Money Laundering and identified included the wide range of products and
Terrorist Financing’,37 which was jointly published by services offered in the sector, the nature of the
the Department of Finance (DoF) and the Department products and services offered, the broad demographic
of Justice and Equality (DJE). A revised version of the of the customer base, the wide geographic reach of the
NRA was released in 201938 which, whilst substantially financial sector, the scale and materiality of the financial
similar to the original (including its risk ratings), was sector in Ireland, and the use of complex corporate
complemented by a series of sector-specific risk vehicles. The NRA also examined the risks within the
assessments on gambling,39 new technologies,40 and regulated non-financial sector, known as ‘designated
legal persons and legal arrangements.41 The purpose non-financial businesses and professions’ (DNFBPs),
of the NRA is to ‘provide a broad assessment of which cover a wide and diverse range of industries. The
Ireland’s ML/TF risks to enhance the understanding of following table presents the NRA’s risk assessments,
them and to develop effective strategies to address broken down sector-by-sector.
them’, and to help ‘allocate resources and prioritise
activities in a proportionate and risk-based manner’.42
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 09TABLE 1: NATIONAL RISK ASSESSMENT RATINGS44 SECTOR / RISK LOW MEDIUM/LOW MEDIUM MEDIUM/HIGH HIGH Retail Banking Non-Retail Banks Money Remittance Firms Other Payment Institutions Bureaux de Change Life Assurance (domestic and cross-border) Funds/ Fund Administrators Asset Managers Investment Firms (other than asset managers) Credit Unions Money Lenders Financial Trust/Company Service Providers (TCSPs) Retail Intermediaries Private Members’ Clubs High Value Goods Dealers Non-Financial Trust/Company Services Providers Notaries Property Services Providers (PSPs) Legal Services Sector Accountancy Services Sector Non-Profit Organisations 10 Transparency International Ireland
TABLE 2: SECTOR-SPECIFIC RISK ASSESSMENT RATINGS
SECTOR / RISK LOW MEDIUM/LOW MEDIUM MEDIUM/HIGH HIGH
Gambling Sector:45
Lotteries
Bingo
Poker
Gaming Machines
Amusements
Online (Betting and Gaming)
Retail and On-Course Bookmaking
The Tote
New Technologies:46
Virtual Currencies
Crowdfunding
Electronic Money
Legal Persons and Legal Arrangements:47
Companies
Funds Structures
SPE Securitization
SPE Non-Securitization
Express Trusts (Other)
Charitable Trusts
Welfare and Community Trusts
Pension Trusts
Employee Share Schemes
Partnerships
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 11While the NRA’s methodology section suggests that assets from overseas – and would help ‘avoid an
the assessment ‘combines qualitative and quantitative over-reliance on... experience and perceptions, which
information and professional expertise’,48 the NRA may inadvertently place more focus on the visible risks
does not refer to quantitative data in support of its occurring in the domestic context’.54
conclusions and risk ratings.49 Instead, there is more
focus on the qualitative ‘professional expertise’ of those In addition to the NRA, which is produced on a cross-
who work in the field. There are notable problems in government basis, the Central Bank of Ireland maintains
this regard, and it is suggested that there is a need for its own Money Laundering/Terrorist Financing Risk
greater insight into the actual level of risk in relevant Assessment, which seeks to identify and assess ‘ML/TF
sectors. Indeed, given that both the Siriwan and risk in the financial sector in Ireland from a supervisory
Abacha money-laundering cases involved the use of perspective’.55 The sectoral risk assessment feeds
life-insurance products, it is perhaps illustrative to note into firm-specific risk ratings for companies that are
that the NRA considers these a ‘low-medium’ risk. designated persons, which also take into account
the Central Bank’s supervisory engagement with that
The need for quantitative data was echoed in the FATF firm, for example through inspections. Like the NRA,
Mutual Evaluation Report (MER),50 which concluded the Central Bank’s risk assessment considers a range
that, ‘While Ireland has demonstrated a reasonably of factors when assessing risk, including the nature,
good understanding of its ML/TF risks, its risks scale and complexity of a sector’s/firm’s products and
understanding would be further enhanced if it includes services, their customer base and distribution channels,
a more comprehensive range of quantitative data’, as it as well as a company’s business model and Anti-Money
would ‘provide additional objective points of reference’.51 Laundering/Combatting the Financing of Terrorism (AML/
Whilst accepting that ‘the use of expert opinion and CFT) controls. Unsurprisingly, therefore, the sectoral risk
feedback in understanding risk is invaluable’, FATF ratings for financial services in the Central Bank’s risk
stressed that ‘consideration should be given to the assessments align with the NRA’s ratings, however it
detection of new and emerging risks and complex ML should be noted that the Central Bank’s risk assessment
schemes’.52 It is perhaps telling that, three years since process is an iterative one, whereas the NRA is a
the MER was published, Ireland has not taken up FATF’s static assessment of risk at a particular point in time.
recommendation to use statistical data ‘to either validate This allows the Central Bank to update its assessment
or correct the risk-map that Ireland’s first NRA has in light of changing circumstances, information and
produced’.53 Statistical analysis is arguably of particular experience, including from its engagement activities,
importance in gauging the risk from ‘less visible forms and thus to adjust the intensity and frequency of its
of ML’ – including the laundering of corruptly obtained supervision accordingly.56
Photo: shutterstock.com/shutterupeire
12 Transparency International IrelandThe risk of money laundering by corrupt foreign PEPs
2.3 FINANCIAL INSTITUTIONS makes an increased level of Customer Due Diligence
Financial services form an important element of (CDD) particularly important – and indeed Enhanced
Ireland’s open, globally oriented economy. Ireland hosts CDD (ECDD) for all PEPs is required by law, irrespective
250 of the world’s leading financial services companies of their residence in Ireland or overseas.68 Ireland is
– including half of the world’s top 50 banks,57 with €2.8 deemed by FATF to have made ‘significant progress’
trillion in net assets in funds domiciled in the country.58 in addressing its previous deficiencies in relation to
Ireland is the largest hedge fund administration centre ECDD, and is now considered to be ‘largely compliant’
in the world, servicing 40% of global hedge fund with FATF standards in this regard. Notwithstanding
assets.59 Dublin – and the Irish Financial Services this, FATF’s 2019 follow-up report also identified that,
Centre (IFSC) in particular – is a major global hub for under Ireland’s legislative amendments, FATF calls
wholesale banking, aircraft leasing and the international for ECDD (recommended when additional risks are
insurance sector, with a large professional support identified) would only apply to ‘third countries’, defined
industry built around these firms. The Irish Stock as non-EU/EEA states. This leaves open the prospect
Exchange60 acts as a world-leading listing venue for that individuals from high-risk European jurisdictions
fund and structured debt products.61 would not be subject to ECDD.69
However, many of the features that make a jurisdiction, Many assets held by funds operating in Ireland’s
such as Ireland, attractive for legitimate financial activity financial sector are placed in structures known
can also make it attractive for corrupt individuals, who as Special Purpose Vehicles (SPVs) or Special
seek stable global financial centres and advantageous Purpose Entities (SPEs), which ‘span a wide range of
tax regimes within which to launder assets. This is activities and often form part of cross-border, multi-
particularly true of corrupt Politically Exposed Persons entity corporate structures’.70 A distinction is usually
(PEPs) – ‘individuals who are or have been entrusted drawn between ‘securitisation SPVs’, which are most
with prominent public functions’62 – whose wealth and/ commonly used for mortgage securities and aircraft
or position generally facilitates access to the global leasing, and ‘non-securitisation SPVs’, which cover
financial system. Indeed, in almost all international cases a diverse range of functions but typically issue debt
of corrupt PEPs studied by FATF, foreign bank accounts securities or loan instruments. SPVs are also often
were used to launder their illicitly obtained assets. referred to as ‘Section 110 companies’, which refers
This led FATF to conclude that ‘corrupt PEPs nearly to the section of the Taxes Consolidation Act 1997
universally attempt to move their money outside of their that effectively exempts these entities from tax whilst
home country’.63 Such assets are typically moved from allowing them to avail of Ireland’s double taxation
lower and middle-income countries to financial centres treaty network. In 2019, non-securitisation SPVs – the
in high-income jurisdictions, with London, New York and majority of which availed of Section 110 – held €479
Tokyo frequently mentioned as destinations of choice.64 billion in assets.71
The use of offshore and/or foreign jurisdictions65 ‘hold
Amendments were made to Section 110 in 2016
the advantage of being harder to investigate for the
following some controversy over their tax status,72
victim country, are perceived as more stable and safer,
however the amendments relate only to those entities
and are more easily accessed than accounts held in the
holding Irish assets and therefore the tax treatment of
PEP’s home country’.66 In addition, ‘a PEP can “stack”
most Section 110 firms remains largely unchanged.
foreign jurisdictions: a bank account in one country
Indeed, Section 110 is still described as being ‘at the
could be owned by a corporation in another jurisdiction,
heart of Ireland’s structured finance regime’, making
which is in turn owned by a trust in a third jurisdiction’,
the country ‘an onshore investment platform... which
as ‘each additional country multiplies the complexity of
should reduce or eliminate withholding taxes on income
the investigation, reduces the chances of a successful
flows and capital gains in treaty jurisdictions’.73 In 2017,
result, and extends the time needed to complete the
Oxfam reported on a Central Bank of Ireland study of
investigation’.67 Stacking can be further enhanced by
non-securitisation SPVs, which demonstrated that,
the use of complex financial structures, such as Special
despite holding trillions of Euro in assets, ‘these
Purpose Vehicles (see below), which can be especially
beneficial to PEPs if they carry low – or no – tax liabilities.
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 13entities actually benefit the Irish economy very little’.74 Given the prominence that FATF gives to the use of
Moreover, the Central Bank paper stated that SPVs corporate vehicles and trusts in its compendium of
‘are generally designed to be tax neutral and most are typologies and methodologies of corruption-related
established as companies with Irish directors but no money-laundering,81 it is unsurprising that Ireland has
dedicated employees’.75 The 2018 Financial Secrecy rated non-financial TCSPs as a ‘Medium-High’ risk (see
Index concluded that, although Ireland ‘worked hard to Table 1). In every case examined for FATF’s ‘Laundering
rehabilitate its name as a member of the international the Proceeds of Corruption’ report, corporate vehicles,
tax community’ after ‘years of criticism and being trusts or non-profit entities were used in laundering
branded a tax haven’, its ‘oversized financial services the proceeds of corruption. The reasons for using
sector and continuing tax structures and reliefs... this method of laundering include concealing the
continue to draw criticism’.76 identity of beneficial owners, creating difficulties for law
Shell companies that cannot be traced back to their real owners are
widely held to be one of the most common means for laundering
money, giving and receiving bribes, busting sanctions, evading taxes,
and financing terrorism.
As well as their tax benefits, SPVs are potentially enforcement to access records, and avoiding public
attractive to money launderers because of their disclosure of assets.82 According to Findley et al, ‘shell
complex and opaque structures’, which make it companies that cannot be traced back to their real
‘difficult to discern the ultimate beneficiary in many owners are widely held to be one of the most common
transactions’.77 Moreover, in Ireland, SPVs can evade means for laundering money, giving and receiving
supervisory oversight and AML regulation by making bribes, busting sanctions, evading taxes, and financing
use of non-domestic financial or credit institutions terrorism’.83 It follows that those entities responsible
that are not subject to the Criminal Justice (Money for establishing and servicing such vehicles and trusts
Laundering and Terrorist Financing) Act 2010 (CJA). present a higher risk of being used by corrupt actors
Therefore, whilst SPVs conducting activities set – though some, known as ‘financial TCSPs’, pose a
out in Schedule 2 of the CJA 2010 are considered lower risk. These service providers are subsidiaries of
‘designated persons’ and subject to supervision by Central Bank-regulated financial institutions typically
the Central Bank for AML/CFT purposes,78 SPVs providing ancillary services to their existing Irish-based
that sit outside Schedule 2 activities can effectively customers, such as trustee services for pension
evade AML measures such as CDD (or, in the case schemes, and are therefore subject to their parent
of PEPs, ECDD). Indeed, the Irish Debt Securities firm’s AML controls and obligations. The NRA rates
Association highlight that, ‘subject to a number of financial TCSPs as a ‘Low’ money laundering risk,
limited exceptions, SPVs are generally not within though notes that customers of financial TCSPs ‘are
scope of the CJA, and as such, are not required to typically “high net worth individuals”’.84
carry out any AML checks in respect of their investors
or the underlying assets which they acquire’.79 The
Department of Finance recognises that these factors
cumulatively create a ‘Very Significant’ vulnerability for
non-securitisation SPVs, placing them at the highest
risk category for money laundering.80
14 Transparency International IrelandIn addition to SPVs, Ireland has had a chequered the CRO calculated as only 69% and 47% of the total of
history in providing mechanisms for avoiding financial those respective categories.95 The maximum penalties for
transparency on beneficial ownership, and which failing to register a beneficial owner are fines of €5,000
presented attractive options to corrupt individuals upon summary conviction, or €500,000 upon conviction
looking to launder their assets. Until relatively recently, on indictment.96 It remains to be seen whether the CRO
Ireland facilitated the establishment of thousands of will have the necessary resources to rigorously audit the
shelf companies, with limited information available on register to ensure the veracity of information submitted,
their beneficial ownership, as well as issuing numerous or indeed to enforce compliance – especially in this
bearer-bonds, against which no ownership information period of the RBO’s early implementation.
is recorded.85 Bearer bonds were abolished by the
Companies Act 201486 and new shelf companies
can no longer be created under Irish company 2.4 NON-FINANCIAL SECTORS
formation legislation, though it is still possible to
purchase previously incorporated but inactive Irish Alongside financial institutions, non-financial sectors and
companies.87 Company formation specialists still offer industries in Ireland also present higher money laundering
Irish companies for sale, some of which have been risks from corrupt individuals overseas, including the
implicated in serious criminal investigations, including property market, the trade in luxury and other high value
for alleged corruption offences overseas.88 Moreover, goods, as well as the legal and accounting professions.
in 2019 FATF found that there is still ‘no explicit Of course, Ireland is by no means unique in facing these
requirement to include beneficiaries of life insurance’ as risks, but the openness of its economy and its high
a heightened risk factor when the beneficiary is a legal dependence on foreign investment present risks for
person.89 FATF furthermore highlighted that the law has money laundering through a variety of channels, including
not yet been amended to allow designated persons in these non-financial sectors.
to discontinue CDD on beneficiaries when to carry on
would ‘tip-off’ the subject.90 Given the evidenced use The Irish property market – especially in Dublin –
of life insurance policies in previous cases of grand has substantially increased in value in recent years,
corruption-related money laundering in Ireland (see although there is little evidence to suggest that Ireland
sections 2.1 and 2.2), it is of particular importance that has become a home for the world’s oligarchs in the
these loopholes are closed at the earliest opportunity. same way as London, Paris or New York. Despite this,
increasing residential and commercial property prices
Since 2017, following the EU’s Fourth Anti-Money promise a solid short-to-medium term investment for
Laundering Directive, companies have been required anyone looking to launder money, and the controls
to ‘obtain and hold adequate, accurate and current around the sector leave some room for concern.97 The
information on their beneficial owner(s) in their own Property Services Regulatory Authority (PSRA) became
internal beneficial ownership register’ and to share the competent authority for Property Services Providers
details of their beneficial ownership with a central (PSPs) in 2016. In FATF’s 2017 MER, various issues
register.91 In April 2019, the Minister of Finance signed were raised in relation to the robustness of the AML
into law a Statutory Instrument to establish an Irish framework around the real estate sector, including the
Central Register of Beneficial Ownership (RBO) of low level of AML compliance by PSPs, the PSRA’s need
Companies and Industrial and Provident Societies, to introduce a Risk-Based Approach to AML supervision,
which is managed by the Companies Registration Office and the lack of AML guidance provided to PSPs by the
(CRO).92 Unrestricted data held within the RBO can be PSRA.98 Furthermore, the MER highlighted that PSPs are
shared with relevant state authorities (who can in turn not required by law to perform CDD on the purchasers
share it with partner agencies within EU member states), of property, which is not in line with Recommendation
whereas a more restricted tier of information is available 22(b) of the FATF standards (recommending that CDD
to the public, upon payment of a small fee (€2.50),93 should be extended to both vendors and purchasers of
whilst data interfaces between the CRO and the Revenue property),99 and leaves a gap in the market’s AML regime
facilitate company information exchange between that could be exploited by corrupt actors.100 Though the
the two agencies.94 The deadline for companies’ PSRA’s AML guidance for PSPs has improved101 – and
submissions of their beneficial ownership details was 22 was recognised as such in FATF’s Follow-up Report102
November 2019 yet, by the end of that month, a total – the wider concerns around AML compliance in this
of 160,000 companies and 450 industrial and provident sector highlighted by the MER remain.
societies had registered their beneficial owners, which
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 15Photo: istockphoto.com/noel bennett
There is also an acknowledged higher risk of money The legal and accountancy professions have a vital
laundering through the trade in luxury and high role in detecting and preventing money laundering.
value goods (HVGs) – for example gold, precious However, lawyers and accountants can also act as
stones, antiques, high-end vehicles and boats – due invaluable ‘gatekeepers’ on behalf of organised crime
notably to the prevalence of cash transactions in such groups and corrupt individuals. According to EUROPOL,
businesses.103 The NRA assessed the money laundering ‘The role of professionals (often known as gatekeepers
risk around High Value Goods Dealers as ‘Medium- or professional enablers)... as facilitators in the money
High’,104 and they are subject to various legal obligations laundering process continues to underpin the methods
under the Criminal Justice (Money Laundering and used by criminal groups’, not least because the services
Terrorist Financing) Act 2010 (as amended), including the of such professionals ‘give the apparatus of money
responsibility to conduct CDD on any cash payments laundering considerable sophistication and a veneer
of €10,000 or more, and – where deemed appropriate of respectability’.111 FATF has paid particular attention
– the requirement to submit Suspicious Transactions to legal professionals, stating that lawyers ‘have been
Report (STRs) to An Garda Síochána and the Revenue used to create corporate vehicles, open bank accounts,
Commissioners.105 The identification of car dealerships transfer proceeds, purchase property, courier cash,
being extensively used for money laundering by Irish and take other means to bypass AML controls’, with
organised crime groups106 has resulted in concerted and some having ‘subsequently used rules of attorney-
robust law enforcement activity against this particular client privilege to shield the identity of corrupt PEPs’.112
sector in recent years.107 Though such investigations are In an Irish context, the NRA concluded that the legal
laudable, it remains imperative that the legitimate focus and accountancy professions present a ‘Medium-High’
upon domestic organised crime involvement in the motor risk.113 However, according to the MER, this risk appears
trade does not allow other HVG sectors that are more not to have received the attention it deserves,114 with
susceptible to the laundering of corruption assets to FATF calling on the Law Society and the designated
escape scrutiny.108 To that end, it is encouraging that 40% accountancy bodies to ‘apply effective, proportionate
of HVG sector inspections in 2018 related to precious and dissuasive sanctions for non-compliance with AML/
metals and stones,109 and that dealers and intermediaries CFT requirements’.115 In particular, it identified that
in the art industry will be among a number of newly the lack of fines available to the Law Society for non-
‘designated bodies’ under proposed legislation.110 compliance ‘undermine the proportionality of sanctions
available in Ireland’.116
16 Transparency International Ireland3.
THE RESPONSE
Assessing Ireland’s legal and institutional framework
3.1 INTERNATIONAL INSTRUMENTS In addition to EU measures, the recommendations and
reviews of the FATF124 have proven central to Ireland
Ireland is a member of, or signatory to, almost all of the improving its AML regime. As an independent, inter-
key multilateral AML and anti-corruption instruments governmental body, FATF has developed a series of
at both the global and European levels. As such, technical standards – The FATF Recommendations125
it is subject to regular peer review and evaluation – the current version of which were issued in 2012 (and
mechanisms that seek to ensure the implementation updated regularly, most recently in June 2019), which
of common standards in the field of AML and counter- have become the de facto international standards
terrorist financing. For AML purposes, the most relevant for AML measures. Evaluations of FATF members
international instruments are the European Union’s against the FATF Recommendations are carried out
Fourth Anti-Money Laundering Directive (4AMLD)117 by technical experts from other FATF member states
and Fifth Anti-Money Laundering Directive on a rolling, roughly ten-year cycle, with follow-up
(5AMLD),118 which have now largely been transposed compliance reports issued in the interim. Ireland joined
into Irish law and are discussed further in section 3.2 FATF in 1991 and has been subject to two MERs, in
below. Furthermore, the Sixth Anti-Money Laundering 2006 and 2017,126 with follow-up reports in 2013 and
Directive (6AMLD)119 is required to be transposed into 2019 – the most recent of which re-rated Ireland’s
Irish law by 3 December 2020. technical compliance with non-compliant, partially
compliant and largely compliant recommendations,
Ireland has also acceded to various other EU legal,
and with recommendations that have changed since
regulatory and technical instruments against money
the MER. This updated report concluded that Ireland
laundering and corruption, including Regulation (EU)
had ‘made good progress’ in addressing deficiencies
2015/847 on information accompanying transfers
identified in the MER and upgraded Ireland’s rating
of funds,120 which seeks to make monetary transfers
for 11 recommendations – though it is still rated
more transparent, the Council Framework Decision
‘partially compliant’ with seven of the MER’s 40
2003/568/JHA on combating corruption in the
recommendations.127 Ireland is due to receive a further
private sector,121 which aims to criminalise both active
FATF follow-up assessment in early 2021.128
and passive bribery, and the 1997 Convention on the
fight against corruption involving officials of the As a member of the Organisation of Economic
European Communities or officials of Member States Cooperation and Development (OECD),129 Ireland
of the European Union,122 which targets corruption on signed the OECD Convention on Combating Bribery
the part of EU or member state public officials. The more of Foreign Public Officials in International Business
recent Directive (EU) 2019/1153 laying down rules Transactions130 in 1997 and ratified the Convention in
facilitating the use of financial and other information 2003. As its name suggests, the OECD’s Convention
for the prevention, detection, investigation or is tightly focused on the corruption of state officials in
prosecution of certain criminal offences123 will – as the course of overseas business activities. Evaluation
and when transposed into domestic law – further of signatories’ implementation of the Convention is via
enhance Irish law enforcement agencies’ access to the OECD’s Working Group on Bribery (comprised of
relevant financial records and centralised registries. experts from the 41 signatories to the Convention),
Safe Haven? Targeting the proceeds of foreign corruption in Ireland 17which also assesses parties’ adherence to the 2009 topics).142 The most recent evaluation was the fourth
OECD Recommendation for Further Combatting round in 2014, which examined corruption prevention in
Bribery of Foreign Public Officials in International respect of parliamentarians, judges and prosecutors.143
Business Transactions.131 Ireland has been evaluated GRECO’s fifth round evaluation of Ireland – examining
by the OECD several times since 2001, with the Working corruption prevention and integrity promotion in central
Group’s most recent monitoring report completed government and law enforcement – was due to take
in 2019.132 This report assessed Ireland’s legislative place in 2020.144
progress on the criminalisation of bribery of foreign public
officials, the liability of legal persons for such bribery, Ireland became a signatory to the United Nations
and the application of money laundering legislation to Convention Against Corruption (UNCAC)145 in
overseas bribery (see section 3.2, below). Although it 2003, and ratified the Convention in 2011, as well as
identified ‘significant issues’ with specific elements of participating on an ongoing basis in the Conference of
Ireland’s foreign bribery offence and the liability of legal the States Parties to UNCAC. The Convention covers a
persons (which will be further reviewed in 2021), the broad spectrum of corruption-related offences, including
report considered that the money laundering elements of both domestic and overseas bribery, influence trading,
the OECD Convention are now fully implemented.133 embezzlement, and the concealment and laundering of
the proceeds of corruption. As a signatory to UNCAC,
As a member of the Council of Europe (CoE),134 Ireland Ireland is subject to a five-yearly cycle of peer review
signed the Criminal Law Convention on Corruption135 of its progress in implementing the Convention. The
in 1999 and ratified it in the form of the Prevention first cycle, which reviewed Ireland’s progress against
of Corruption (Amendment) Act 2001 (which has Chapters III (Criminalisation) and IV (Law Enforcement
subsequently been superseded – see section 3.2, below). and International Cooperation), took place in 2014,146
It also signed the Additional Protocol to the Criminal and the second, reviewing progress against Chapters
Law Convention on Corruption in 2003.136 Though II (Preventative Measures) and V (Asset Recovery),
aimed primarily at domestic forms of corruption, the was undertaken in 2019. Though broadly positive, the
Criminal Law Convention on Corruption reinforces various UNCAC Review Group raised some concerns and made
institutional, legal and procedural measures that can in a number of practical recommendations, some of which
some circumstances also be used against the proceeds are echoed by this report (see chapter 6).147 Ireland is
of foreign corruption. Although Ireland signed the Civil also a signatory to the United Nations Convention on
Law Convention on Corruption at the same time in Transnational Organised Crime,148 which provides for
1999, it has yet to ratify this complementary treaty.137 international cooperation on a broad range of organised
Ireland is also a signatory to the 1990 Convention on crime offences, including money laundering and wider
Laundering, Search, Seizure and Confiscation of economic crimes.
the Proceeds of Crime,138 but is one of just five of the
CoE’s 47 members not to have signed the updated
2005 version, known as the ‘Warsaw Convention’, which 3.2 DOMESTIC LEGISLATION
extends the treaty to terrorist financing.139
In domestic law, the main legislative basis for Ireland’s
The principal mechanism for ensuring compliance with anti-money laundering measures is provided by the
the CoE Convention(s) on Corruption is via the Group Criminal Justice (Money Laundering and Terrorist
of States Against Corruption (GRECO),140 who carry Financing) Act 2010,149 as amended by Part 2 of the
out mutual evaluation of members’ adherence to the Criminal Justice Act 2013,150 which established a
Twenty Guiding Principles for the Fight Against risk-based approach to AML measures with three levels
Corruption.141 GRECO has to date launched five of due diligence, and the Criminal Justice (Money
evaluation rounds that each deal with specific provisions Laundering and Terrorist Financing) (Amendment) Act
of the Guiding Principles and selected provisions of the 2018,151 which transposed most provisions of 4AMLD into
Criminal Law Convention. Perhaps the most relevant Irish law.152 Ireland has, however, been fined €2 million by
GRECO evaluation of Ireland for the purposes of this the European Court of Justice for its failure to incorporate
report was the second round in 2005, which dealt with 4AMLD into domestic law by the 26 June 2017
asset recovery and money laundering (amongst other deadline.153 5AMLD builds upon 4AMLD in certain areas,
18 Transparency International Irelandand was required to be transposed by EU member states
by 10 January 2020, though Ireland was put on notice
by the Commission for having only partially transposed
5AMLD by that date. In August 2020, the Cabinet
approved publication of the Criminal Justice (Money ‘Dual criminality’ provisions...
Laundering and Terrorist Financing) (Amendment) Bill to
give effect to the remaining provisions of 5AMLD.154 Other
could be problematic if, for
key AML provisions have been introduced through the example, the other state’s
European Union (Anti-Money Laundering: Beneficial
Ownership of Corporate Entities) Regulations 2019,155 laws are weak or unclear, and
which legislated for the creation of a publicly-accessible
register of beneficial ownership (see section 2.3) and the could also pose difficulties for
European Union (Money Laundering and Terrorist
Financing) Regulations 2019,156 which require regulated
collecting sufficient evidence
entities to make whistleblower provisions for AML from some countries.
purposes, mandate risk-based supervision, and facilitate
international cooperation between AML supervisors.
Ireland has until 3 December 2020 to transpose
6AMLD157 into national law, with implementation for Public Officials in International Business Transactions,
regulated entities required by 3 June 2021. the CoE Criminal Law Convention on Corruption,
and the UN Convention Against Corruption, as well
Asset confiscation and civil forfeiture is legislated for as repealing the various Prevention of Corruption
respectively in the Criminal Justice Act 1994 (as Acts enacted between 1889 and 2010.165 As such,
amended)158 and the Proceeds of Crime Acts 1996,159 the Act provides a single, comprehensive legislative
2005160 and 2016,161 which provide for the seizure, basis for preventative and investigative anti-corruption
detention and disposal of criminally derived assets, measures, including the criminalisation of passive
as well as the Criminal Assets Bureau Act 1996,162 corruption, influence-trading and business intimidation,
which established and defined the purpose, functions the introduction of various presumptions relating to
and governance of the multi-agency Criminal Assets corruption, the application of extra-territoriality to certain
Bureau. International mutual legal assistance is provided corrupt acts, and the extension of liability for corruption
for in the Criminal Justice (Mutual Assistance) Act offences to legal persons, or corporate entities.
2008 (as amended),163 which, inter alia, provides for
the exchange of financial information between states Despite consolidating and updating Ireland’s legislative
for criminal investigation purposes, as well as making framework around corruption, both An Garda Síochána
provision for outgoing and incoming applications for the and the Department of Foreign Affairs and Trade (DFAT)
freezing, confiscation and forfeiture of criminal assets (in have queried the Act’s ‘dual criminality’ provisions,
accordance with the UN Conventions on Corruption and which mean that certain offences committed overseas
Transnational Organized Crime). must be an offence in both jurisdictions, and that certain
connections to Ireland should be established.166 This
Although there are various pieces of legislation dealing could be problematic if, for example, the other state’s
with specific aspects of corruption in Irish public life laws are weak or unclear, and could also pose difficulties
(including ethics, standards in public life, protected for collecting sufficient evidence from some countries.
disclosures and the regulation of political lobbying), Although the OECD considered that the dual criminality
the main piece of legislation dealing with corruption issue had been dealt with in relation to the laundering of
is the Criminal Justice (Corruption Offences) Act profits from bribery overseas,167 the concerns expressed
2018,164 which gave effect to the EU Convention Against by the Garda and DFAT in relation to corruption offences
Corruption Involving EU Officials or Officials of EU under the new Act have yet to be resolved.
Countries, the OECD Convention on Bribery of Foreign
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